Originally Posted by nephinfan
Lol. Yeah, like I said, I was reaching....and really just trying to make a point more than anything. So, are you saying that if you can show that you've lost money on the sale, such as the used toaster example, you can take it as a loss and not get taxed? I think that's the way I've been understanding it in this thread so far. However, if that is the way they see it, does that apply only to federal or does that also include the way the state would look at it?
I am saying that if it is personal use property. I am NOT saying that if it is a hobby. Because of the limitations mentioned above, hobby expenses most of the time are not deductible. And you also cannot generate a loss from a hobby. So you basically have 4 options to figure out what your income is:
1) Personal use - capital gain/loss. Can't claim a loss, and hardly ever can generate a gain. Cards/Memorabilia are not personal use property, but personal use property was asked about earlier in the thread so I addressed it here
2) Hobby - claim all income. Losses are itemized and can only take them if 1) you file schedule A and itemize your deductions, and 2) your hobby expenses exceed 2% of your AGI. Also cannot generate a loss, so you can only claim expenses up to hobby income earned.
3) Business - Report all gains/losses on schedule C. No income/loss limitations for business
4) Investment - Gain/losses are capital gains. Capital gains get preferential tax treatment (15% maximium tax rate) and losses can be deducted $3,000 in the current year and anything above that needs to be carried forward to future years (after being netted with other capital gains/losses)